By David Canellis
Translation: Blockchain in Vernacular
The drastic fluctuations of Bitcoin have long taught us to "accept what comes our way."
We seem to have become accustomed to the expectation that even in the midst of a roaring bull market, a sharp correction will inevitably occur, shattering our hopes, dreams and wallet balances.
So it’s understandable that we all thought Bitcoin would suddenly plummet 50% on its way to six figures or even higher.
Does this expectation make sense?
First of all, it needs to be made clear that Bitcoin does have a "tradition" of plummeting by about 80% from the peak of the bull market to the bottom of the bear market. Since Bitcoin's first sharp rise in 2011, every cycle has been almost without exception.
However, this article is not about pullbacks during bear markets (for that, refer to our previous analysis). Instead, we will focus on pullbacks during bull markets, like the one we are experiencing right now.
The chart below shows Bitcoin’s price performance over six different time spans, ranging from three days to three months, and is presented on a rolling basis, from the beginning of the cycle (bottom) to the all-time high (peak).
Each line represents a time span. For example, the dark purple line shows the percentage difference between each daily low and the open three days earlier, while the green line shows a like-for-like comparison over a three-month period.
The dotted line at the bottom represents the 50% retracement level. As shown in the chart, there has never been such a large retracement during the bull run from August 2015 to December 2017.
The biggest drawdown during this cycle occurred near the end of September 2017, when it dropped 40% in two weeks.
However, during the subsequent bull market from 2018 to 2021, there were three sharp corrections of more than 50%.
One of them was the market crash triggered by the epidemic in March 2020, when the stock market experienced a series of "Black Mondays" one after another.
Bitcoin has fallen 50% or more in almost all time spans, with the exception of the three-month span, which was just under 50% at 47%.
Two other major retracements occurred in May and July 2021, when Bitcoin fell from an all-time high of more than $60,000 to $30,000. However, in the following four months, Bitcoin quickly rebounded to a new high of nearly $69,000.
This pullback has been relatively mild, with the most significant correction in the bull market occurring in the first week of August.
Bitcoin has fallen 30% over multiple time frames, from a high of more than $70,000 in June to a low of $49,200.
Of course, this doesn’t mean that Bitcoin has lost its volatility. I still think there will be ups and downs in the future.
It is worth noting that the most severe pullbacks in history often occur at the end of a bull market.
Therefore, the longer the bull market lasts without a major correction, the more unsettling the uncertainty about future trends becomes - which is also the unique "thrill" of investing in Bitcoin.
